Opening a beauty salon of your own is a smart business idea as the industry has been steadily growing over the years. It’s a kind of stable business that brings good returns and has reasonably positive prospects. Remember to include this information in your pitch when applying for a loan. As securing financing for small business can be quite a challenge, you’ll need to use some tricks in order to get the best terms and backing from a good lender.
How to Get a Loan for a Beauty Salon: 5 Tips for Obtaining the Best Rates
1. Be honest and realistic about your risks
One of the most important improvements you can make in your small business loan application is to include an honest risk assessment. The good news is that with a good business plan on hand and a great space in sight for your future salon, the risks for this business venture are relatively small. However, you’ll need to be realistic about them.
This approach will show the lender that you are serious and understand exactly what you are getting into. Such small detail can work in your favor even if the risks are high as it proves your honesty to the lender.
Factors that increase your risk in the lenders’ eyes include:
- Low credit score
- Low estimated profits
- Little or no collateral
- Unorganized records
- Bad credit history
- Poorly-developed business plan
2. Get a start on setting up the business
You’ll have a much lower chance of obtaining financing if you only have a business plan to show the lender. Boost your chances by actually starting a business or using your savings. It’s always easier to get a loan for improving the existing salon that brings profit than to fund a new one.
Even if you can’t do much, you should at the very least rent the space and get some essential salon furniture. Your goal at this point is to have some return with minimal investment. Basically, you simply need to prove that this business can succeed and show this to the lender. Then, focus on explaining how much better you can make it with their financing.
3. Plan your repayments beforehand
When you need to secure financing to open a beauty salon remember that the majority of lenders don’t really care about your success. But they care about your ability to pay off the debt with interest.
Therefore, an effective way to appeal to prospective lenders is to show that you’ll take extra steps to return their money. For example, add starting a business savings account to the business plan you include in the loan application. The purpose of this account must be to save up money on loan payments. You should also provide a plan that will explain how exactly you will use the loan money to ensure that you get the funds necessary to stay on top of monthly payments.
4. Seek to establish a relationship with the lender
Establishing good personal relationships increases your chances of securing financing for a beauty salon. When working with an angel investor, do your best to make them feel ‘included’ into the business.
When applying for a small business loan at a bank, open your business account and get credit cards from the same bank. If the lender offers some other services, use them as this will help you establish trust as well as prove your dependability.
5. Shop around for the best deal
No matter how much you want to open a beauty salon right now, you shouldn’t fall for the first decent deal you find. In fact, sometimes the lowest interest rates don’t indicate a good deal.
What you need is to explore every option you have and compare them. Look at repayment terms, additional services, lender’s reputation, and flexibility of the loan before you make a final decision.